Online trading platform Robinhood has agreed to pay $29.75 million to resolve several probes from the Financial Industry Regulatory Authority (FINRA) related to our supervision and compliance practices.
The settlement figures consisted of a $26 million civil fine and $3.75 million in reparations to clients, FINRA said on March 7. Robin Hood “failed to respond to the red flag of potential fraud,” FINRA said, which would lead to money laundering and oversight and disclosure violations.
FINRA has discovered that Robinhood Financial cannot reasonably oversee its clearing system despite significant processing delays due to increased demand between March 2020 and January 2021.
FINRA also said Robinhood Financial and Robinhood securities have failed to detect, investigate or report cases in which customer accounts have been taken over by manipulative transactions, suspicious money moves, and third-party hackers.
It has been discovered that Robinhood Financial opened “thousands of accounts” when it did not reasonably verify the identity of its customers, Finra said.
As such, Robinhood has failed to establish and implement a reasonable money laundering program, Financial Regulator added.
Robinhood has also failed to “reasonably oversee and retain” social media communications by promoting posting from paid social media influencers, Finra added.
“Some of these communications included statements that mislead investors because they were either committed or were fair and unbalanced.”
Excerpts from FINRA’s Robinhood research. Source: FINRA
Robinhood Financial provided inaccurate or incomplete disclosure to customers, resulting in $3.75 million in compensation arising from the customer providing inaccurate or incomplete disclosure by customers due to customer restricting orders.
Both Robinhood Financial and Robinhood securities have agreed to enter the FINRA findings without entitling or rejecting the charges.
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It’s just two months after the two Robinhood entities reached a $45 million settlement with U.S. securities regulators on January 13 after the investigation was accused of violating more than 10 securities law provisions.
Robinhood Financial and Robinhood Securities accused them of failing to maintain and maintain electronic communications from customers between 2020 and 2021 because they “recognized certain findings” in their investigation.
Meanwhile, Robinhood reported net profit of $916 million and revenue of more than $1 billion in the fourth quarter of 2024.
Cryptocurrency accounted for $358 million of Robinhood’s $672 million transaction-based revenue (an increase of 200% year-on-year), while cryptocurrency transactions increased 450% year-on-year to $71 billion.
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